GLOBAL MARKETS-Asia stocks surge, yen falls after BOJ holds rates
Asian markets rallied hard with Wall Street on Friday as South Korea’s battered market made a record comeback, stirring hopes that the recent selloff in AI-linked assets may be near an end.
The yen was also firmly in the spotlight, holding some distance away from a 40-year trough after suspected coordinated intervention from various authorities in the previous session, though it gave up more of its gains after the Bank of Japan (BOJ) left rates on hold. Long-end U.S. Treasury yields held near 19-year highs while short-end yields eased, steepening the curve as doubts grow over the Federal Reserve’s ability to anchor inflation expectations.
South Korea’s Kospi leapt 14% on Friday, reversing steep losses from earlier in the week. Japan’s Nikkei similarly advanced more than 4% and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 5%. That followed surges in AI heavyweights Microsoft and Amazon overnight, lifting chip stocks broadly after upbeat earnings and forecasts from the pair eased concerns over hefty capital spending.
“Both the earnings as well as the sentiment are kind of coming back a bit after the really overexaggerated move in the earlier part of the week,” said Fabien Yip, a market analyst at IG. “The AI demand story didn’t really decelerate, it seems like it’s still sustainable. So the selloff that we saw… is maybe the market overreacting to some of those concerns around (capex spending).”
Despite Friday’s turnaround, the Kospi was still set to lose nearly 25% in July, marking its largest monthly loss since 1997. The wild swings in the market had prompted South Korean authorities to rein in the leveraged products that have wreaked havoc and wiped out the savings of some retail investors.
“Clients are asking whether hyperscalers will maintain current capex plans and whether AI adoption will translate into meaningful revenues and productivity gains,” said Jacky Tang, Deutsche Bank’s Private Bank emerging markets chief investment officer. “Our view is that the correction reflects a reset in expectations after an exceptional rally rather than a material weakening of the underlying investment case.”
Nasdaq futures were up 0.66% and S&P 500 futures added 0.25%. In Europe, EUROSTOXX 50 futures advanced 0.58%, while FTSE futures and DAX futures rose 0.36% and 0.45%, respectively. Chinese markets followed suit. The CSI AI index and Shanghai’s tech-focused STAR Composite Index rose more than 7% each.
BOJ STANDS PAT ON RATES The yen was nearly 0.8% weaker at 160.76 per dollar, after the BOJ on Friday kept rates on hold and gave little indication of when further hikes could come.
“The decision to keep rates unchanged was in line with expectations and came as no surprise, given that the BOJ had only just raised rates in June. However, board member Takata’s dissent in favor of another consecutive rate hike was somewhat unexpected,” said Hirofumi Suzuki, chief FX strategist at SMBC. The yen had already been sliding prior to the decision, as traders tested Tokyo’s resolve after Japan was suspected to have intervened in the foreign exchange market in New York hours on Thursday, leading to a 2.4% surge in the currency.
In a rare move, South Korea’s foreign exchange authorities also conducted dollar-selling intervention on Thursday, while the Nikkei reported that U.S. authorities also conducted so-called “rate checks”, pointing to a possible joint intervention. A trader, who declined to be named because they were not authorised to speak to the media, said dollar/yen liquidity was thin on Friday due to nerves over further action from authorities.
The latest bout of strength in the yen in turn kept pressure on the dollar, leaving the euro perched near an over one-month high at $1.1509, while sterling bought $1.3447, holding to most of Thursday’s 0.7% gain. MIDDLE EAST UNCERTAINTY LINGERS
Oil prices fell on Friday, with Brent crude futures down more than 1% at $88.00 per barrel, while U.S. crude dropped 1.8% to $82.08 a barrel. A drone strike that sparked fires on two gas vessels in Egypt’s Mediterranean port of Damietta has raised a new threat to shipping through the Suez Canal, one of the last major export routes available to Saudi oil amid the expanding U.S.-Iran war.
“The striking feature of the market reaction is that energy prices did not panic despite the deterioration in the conflict,” said Rodrigo Catril, senior FX strategist at National Australia Bank. Elsewhere, spot gold was down 0.7% at $4,072.93 an ounce.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
